How to Build a Metric Management Culture at Your Distribution Business

When management guru Peter Drucker famously said, “You can’t manage what you can’t measure,” he was saying that, without clearly established success metrics, you can’t quantify progress, adjust processes, or produce desired outcomes. Put simply, in the absence of clear objectives, companies are stuck in a constant state of guessing—and hoping that they’re doing the right thing to win their end games.

If your distribution business is stuck in this rut, it’s not alone. Organizations of all sizes and across many different industries fly by the seat of their pants, focusing on tackling day-to-day tasks and putting out fires as they come up instead of thinking proactively. And while this approach may help firms get from one day to the next, they do very little to advance firms toward their ultimate success goals, improve profitability, retain valued employees, and grow their bottom lines.

To overcome these challenges, more companies are implementing metrics-focused cultures that leverage the power of accountability, tracking, and goal-setting. In 16 Distribution Industry Trends for 2016, ProSales points to metric management cultures as an important advantage point for today’s distributors.

“Reviewing data and crafting metrics provides insights to drive direction and engender accountability,” the authors state. “If you don’t commit to objectives, then qualitative criteria can be perceived as favoritism or enabling mediocrity, which lowers morale and overall performance.”

Two Metric-Centric Cultural Approaches
Defined by TechTarget as a quantifiable measure that businesses use to track, monitor, and assess the success or failure of various business processes, business metrics help companies track cost management. However, the overall point of employing metrics is to communicate a company's progression toward certain long- and short-term objectives.

“Without awareness and accountability to metrics, leaders can’t know how successful their strategy is,” Chris Davis points out in Managing Through Metrics. “…leaders must consider and actively address the management dimension of metrics to ensure their organization maintains focus, alignment, and accountability for pursuing the company’s strategy.”

According to MITS’ recent webinar 3 Keys to Distributor Analytics Implementation, there are two paths that distributors typically take when rolling out metric management cultures, the top down approach and the bottom up approach. And while both options focus on the metrics, reports, and analysis that an organization’s different roles need to be able to do their jobs more effectively, one strategy can be much more powerful than the other.

Going From the Bottom Up
With this option, a distributor kicks off the initiative by assessing individual people and their respective roles within the company. From there, it can begin crafting information that’s appropriate for each of those roles. “This is what we see 80% of the time in terms of how a company implements an analytics solution,” said Gary Owen, MITS’ CEO.

In most cases, companies will then build committees within the different operational groups within the company (i.e., by pulling together a handful of sales reps, operations managers, and/or inventory managers and asking them what information they need to do their jobs). “The individual role component is about taking the best and brightest employees and capturing their decisions,” said Owen, “and then putting that information into a model or dashboard.”

Taking the Top Down Approach
Used less frequently, this approach can be much more powerful than the individual role approach. In most cases, it starts by figuring out exactly who the distributor’s CEO goes to when he or she is upset, frustrated, or confused about a company decision or move. Who holds the responsibility? (In most cases, the top-down approach flows from the CEO to the branch manager to the sales rep to the customer.)

Once that process flow is determined, the next step is to outline those roles and determine what type of performance is expected from each of them. This entails looking at sales for the entire company, evaluating sales for each branch, then for every sales rep and customer. “This way, you’re comparing apples-to-apples from the top to the bottom of the organization,” said Owen, “and everyone can look at data that they’re ultimately responsible for.”

Here at MITS, we’ve been helping distributors use the data in their systems to make better decisions since 1996. From the types of reports you run to the data that’s in those reports, MITS Distributor Analytics gives you the answers and insight you need to take action. Please contact us today to learn more.